Teradyne Reports Third Quarter 2024 Results

Teradyne, Inc. (NASDAQ: TER):

Revenue at the high-end and earnings above Q3 guidance
Revenue of $737 million in Q3’24, up 5% from Q3’23
Year-over-year growth driven by strong AI-related demand

Q3'24

Q3'23

Q2'24

Revenue (mil)

737

704

730

GAAP EPS

0.89

0.78

1.14

Non-GAAP EPS

0.90

0.80

0.86

Teradyne, Inc. (NASDAQ: TER) reported revenue of $737 million for the third quarter of 2024 of which $543 million was in Semiconductor Test, $73 million in System Test, $33 million in Wireless Test and $89 million in Robotics. GAAP net income for the third quarter of 2024 was $145.6 million or $0.89 per diluted share. On a non-GAAP basis, Teradyne’s net income in the third quarter of 2024 was $147.6 million, or $0.90 per diluted share, which excluded acquired intangible asset amortization, restructuring and other charges, amortization on our investment in Technoprobe, legal settlement, pension mark-to-market, and included the related tax impact on non-GAAP adjustments.

“Semiconductor Test continues to perform better than planned on record Memory revenue driven by High Bandwidth Memory (HBM) and compute demand for AI applications,” said Teradyne CEO, Greg Smith. “Robotics continues to execute to its longer-term growth strategy with improving traction in recurring software and services revenue and progress in the UR OEM channel. As we finish 2024 and look forward to 2025, we are excited about building on this progress."

Guidance for the fourth quarter of 2024 is revenue of $710 million to $760 million, with GAAP net income of $0.73 to $0.91 per diluted share and non-GAAP net income of $0.80 to $0.97 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization and amortization on our investment in Technoprobe, as well as the related tax impact on non-GAAP adjustments.

Webcast

A conference call to discuss the third quarter results, along with management’s business outlook, will follow at 8:30 a.m. ET, Thursday, October 24, 2024. Interested investors should access the webcast at www.teradyne.com and click on "Investors" at least five minutes before the call begins. Presentation materials will be available starting at 8:30 a.m. ET. A replay will be available on the Teradyne website at www.teradyne.com/investors.

Non-GAAP Results

In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses non-GAAP results of operations that exclude certain income items and charges. These results are provided as a complement to results provided in accordance with GAAP. Non-GAAP income from operations and non-GAAP net income exclude acquired intangible assets amortization, restructuring and other, pension actuarial gains and losses, stock compensation modification expense, gains and losses on foreign exchange options in connection with acquisitions and divestitures, gain on sale of business, legal settlement, discrete income tax adjustments, and includes the related tax impact on non-GAAP adjustments. GAAP requires that these items be included in determining income from operations and net income. Non-GAAP income from operations, non-GAAP net income, non-GAAP income from operations as a percentage of revenue, non-GAAP net income as a percentage of revenue, and non-GAAP net income per share are non-GAAP performance measures presented to provide meaningful supplemental information regarding Teradyne’s baseline performance before gains, losses or other charges that may not be indicative of Teradyne’s current core business or future outlook. These non-GAAP performance measures are used to make operational decisions, to determine employee compensation, to forecast future operational results, and for comparison with Teradyne’s business plan, historical operating results and the operating results of Teradyne’s competitors. Non-GAAP diluted shares include the impact of Teradyne’s call option on its shares. Management believes each of these non-GAAP performance measures provides useful supplemental information for investors, allowing greater transparency to the information used by management in its operational decision making and in the review of Teradyne’s financial and operational performance, as well as facilitating meaningful comparisons of Teradyne’s results in the current period compared with those in prior and future periods. A reconciliation of each available GAAP to non-GAAP financial measure discussed in this press release is contained in the attached exhibits and on the Teradyne website at www.teradyne.com by clicking on “Investor Relations” and then selecting “Financials” and the “GAAP to Non-GAAP Reconciliation” link. The non-GAAP performance measures discussed in this press release may not be comparable to similarly titled measures used by other companies. The presentation of non-GAAP measures is not meant to be considered in isolation, as a substitute for, or superior to, financial measures or information provided in accordance with GAAP.

About Teradyne

Teradyne (NASDAQ:TER) test technology helps bring high-quality innovations such as smart devices, life-saving medical equipment and data storage systems to market, faster. Its advanced test solutions for semiconductors, electronic systems, wireless devices and more ensure that products perform as they were designed. Its robotics offerings include collaborative and mobile robots that help manufacturers of all sizes increase productivity, improve safety, and lower costs. In 2023, Teradyne had revenue of $2.7 billion and today employs over 6,400 people worldwide. For more information, visit teradyne.com. Teradyne® is a registered trademark of Teradyne, Inc., in the U.S. and other countries.

Safe Harbor Statement

This release contains forward-looking statements including statements regarding Teradyne’s future business prospects, financial performance or position and results of operations. You can identify forward-looking statements by their use of forward-looking words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “goal” or other comparable terms. Forward-looking statements in this press release address various matters, including statements regarding Teradyne’s financial guidance. Investors are cautioned that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements due to known and unknown risks, uncertainties, assumptions, and other factors. Such factors include, but are not limited to, macroeconomic factors and slowdowns or downturns in economic conditions generally and in the markets in which Teradyne operates; decreased or delayed product demand from one or more significant customers; a slowdown or inability in the development, delivery and acceptance of new products; the ability to grow the Robotics business; the impact of increased research and development spending; the impact of epidemics or pandemics such as COVID-19; the impact of a supply shortage on our supply chain and contract manufacturers; the consummation and success of any mergers or acquisitions; unexpected cash needs; the business judgment of the board of directors that a declaration of a dividend or the repurchase of common stock is not in Teradyne’s best interests; changes to U.S. or global tax regulations or guidance; the impact of any tariffs or export controls imposed by the U.S. or China; the impact of U.S. Department of Commerce or other government agency regulations relating to Huawei, HiSilicon and other customers or potential customers; the impact of U.S. Department Commerce export control regulations for certain U.S. products and technology sold to military end users or for military end-use in China; the impact of the current conflicts in Israel; the impact of regulations published by the U.S. Department of Commerce relating to semiconductors and semiconductor manufacturing equipment destined for certain end uses in China.

The risks included above are not exhaustive. For a more detailed description of the risk factors associated with Teradyne, please refer to Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Many of these factors are macroeconomic in nature and are, therefore, beyond Teradyne’s control. We caution readers not to place undue reliance on any forward-looking statements included in this press release which speak only as to the date of this press release. Teradyne specifically disclaims any obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.

TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2024

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter Ended

Nine Months Ended

September 29, 2024

June 30, 2024

October 1, 2023

September 29, 2024

October 1, 2023

Net revenues

737,298

729,879

703,732

2,066,996

2,005,699

Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)

300,784

304,035

305,441

865,357

848,495

Gross profit

436,514

425,844

398,291

1,201,639

1,157,204

Operating expenses:

Selling and administrative (2)

157,649

154,470

138,330

461,307

434,979

Engineering and development

117,474

111,816

104,413

332,489

315,881

Acquired intangible assets amortization

4,748

4,664

4,720

14,108

14,348

Restructuring and other (3)

4,578

2,012

6,856

11,018

15,251

Gain on sale of business (4)

—

(57,486

)

—

(57,486

)

—

Operating expenses

284,449

215,476

254,319

761,436

780,459

Income from operations

152,065

210,368

143,972

440,203

376,745

Interest and other (income) expense (5)

(6,919

)

(9,035

)

(308

)

(11,086

)

(9,022

)

Income before income taxes and equity in net earnings of affiliate

158,984

219,403

144,280

451,289

385,767

Income tax provision

12,260

33,130

16,164

54,095

54,069

Income before equity in net earnings of affiliate

146,724

186,273

128,116

397,194

331,698

Equity in net earnings of affiliate

(1,075

)

—

(1,075

)

—

Net income

145,649

186,273

128,116

396,119

331,698

Net income per common share:

Basic

0.89

1.18

0.83

2.51

2.14

Diluted

0.89

1.14

0.78

2.42

2.01

Weighted average common shares - basic

163,002

157,804

153,762

157,951

154,809

Weighted average common shares - diluted (6)

164,253

163,470

164,050

163,357

165,037

Cash dividend declared per common share

0.12

0.11

0.36

0.33

(1)

Cost of revenues includes:

Quarter Ended

Nine Months Ended

September 29, 2024

June 30, 2024

October 1, 2023

September 29, 2024

October 1, 2023

Provision for excess and obsolete inventory

6,078

3,261

11,728

15,515

23,069

Legal settlement

3,600

—

3,600

—

Sale of previously written down inventory

(472

)

(592

)

(1,198

)

(1,787

)

(4,046

)

9,206

2,669

10,530

17,328

19,023

(2)

For the nine months ended September 29, 2024, selling and administrative expenses included an equity charge of $1.7 million for the modification of Teradyne executives' retirement agreements. For the nine months ended October 1, 2023, selling and administrative expenses included an equity charge of $5.9 million for the modification of Teradyne’s retired CEO’s outstanding equity awards in connection with his February 1, 2023, retirement.

(3)

Restructuring and other consists of:

Quarter Ended

Nine Months Ended

September 29, 2024

June 30, 2024

October 1, 2023

September 29, 2024

October 1, 2023

Employee severance

1,280

2,012

4,658

5,319

11,835

Acquisition and divestiture related expenses

—

2,214

—

Contract termination

—

1,511

—

1,511

Other

3,298

—

687

3,485

1,905

4,578

2,012

6,856

11,018

15,251

(4)

On May 27, 2024, Teradyne sold Teradyne's Device Interface Solution ("DIS") business, a component of the Semiconductor Test segment, to Technoprobe S.p.A. ("Technoprobe"), for $85.0 million, net of cash and cash equivalents sold and a working capital adjustment.

(5)

Interest and other includes:

Quarter Ended

Nine Months Ended

September 29, 2024

June 30, 2024

October 1, 2023

September 29, 2024

October 1, 2023

Pension actuarial losses (gains)

(2,262

)

(250

)

(2,513

)

125

Loss (gain) on foreign exchange option

—

(4,154

)

—

9,765

—

(6)

Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the quarter ended October 1, 2023, 0.6 million shares have been included in diluted shares. For the nine months ended October 1, 2023, 0.8 million shares have been included in diluted shares. For the quarters ended September 29, 2024, June 30, 2024, and October 1, 2023, diluted shares included 0.5 million, 4.9 million, and 9.2 million shares, respectively, from the convertible note hedge transaction. For the nine months ended September 29, 2024, and October 1, 2023, diluted shares included 4.8 million and 9.0 million shares, respectively, from the convertible note hedge transaction.

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

September 29, 2024

December 31, 2023

Assets

Cash and cash equivalents

510,036

757,571

Marketable securities

41,631

62,154

Accounts receivable, net

484,376

422,124

Inventories, net

297,340

309,974

Prepayments

489,548

548,970

Other current assets

15,935

37,992

Current assets held for sale

—

23,250

Total current assets

1,838,866

2,162,035

Property, plant and equipment, net

491,704

445,492

Operating lease right-of-use assets, net

70,784

73,417

Marketable securities

125,944

117,434

Deferred tax assets

201,881

175,775

Retirement plans assets

13,114

11,504

Equity method investment

538,351

—

Other assets

48,384

38,580

Acquired intangible assets, net

21,288

35,404

Goodwill

419,412

415,652

Assets held for sale

—

11,531

Total assets

3,769,728

3,486,824

Liabilities

Accounts payable

158,459

180,131

Accrued employees’ compensation and withholdings

159,794

191,750

Deferred revenue and customer advances

99,776

99,804

Other accrued liabilities

105,150

114,712

Operating lease liabilities

19,175

17,522

Income taxes payable

52,542

48,653

Current liabilities held for sale

—

7,379

Total current liabilities

594,896

659,951

Retirement plans liabilities

137,735

132,090

Long-term deferred revenue and customer advances

41,135

37,282

Long-term other accrued liabilities

8,373

19,998

Deferred tax liabilities

164

183

Long-term operating lease liabilities

60,287

65,092

Long-term income taxes payable

24,596

44,331

Liabilities held for sale

—

2,000

Total liabilities

867,186

960,927

Shareholders’ equity

2,902,542

2,525,897

Total liabilities and shareholders’ equity

3,769,728

3,486,824

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

Quarter Ended

Nine Months Ended

September 29, 2024

October 1, 2023

September 29, 2024

October 1, 2023

Cash flows from operating activities:

Net income

145,649

128,116

396,119

331,698

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

25,553

23,627

74,480

68,858

Stock-based compensation

14,574

12,787

45,267

45,236

Provision for excess and obsolete inventory

6,078

11,728

15,516

23,069

Amortization

4,736

4,503

14,133

14,083

Equity in net earnings of affiliate

1,075

—

1,075

—

Gain on sale of business

—

(57,486

)

—

Deferred taxes

(9,431

)

(10,455

)

(26,261

)

(24,026

)

Losses (gains) on investments

(2,951

)

1,586

10,139

(3,159

)

Retirement plan actuarial losses (gains)

(2,262

)

—

(2,512

)

—

Other

(6,282

)

(5,041

)

(13

)

Changes in operating assets and liabilities

Accounts receivable

(11,055

)

32,884

(65,266

)

30,191

Inventories

(5,974

)

20,240

11,127

6,395

Prepayments and other assets

39,248

(34,398

)

61,438

(63,982

)

Accounts payable and other liabilities

(10,657

)

28,513

(63,666

)

3,999

Deferred revenue and customer advances

885

(14,579

)

3,624

(49,517

)

Retirement plans contributions

(1,395

)

(1,216

)

(4,169

)

(3,698

)

Income taxes

(21,520

)

(29,069

)

(18,898

)

(42,683

)

Net cash provided by operating activities

166,271

174,347

389,619

336,451

Cash flows from investing activities:

Purchases of property, plant and equipment

(51,841

)

(34,604

)

(140,710

)

(115,306

)

Purchases of marketable securities

(7,340

)

(38,768

)

(35,097

)

(137,786

)

Purchases of investment in a business

(2,407

)

—

(527,060

)

—

Issuance of convertible loan

—

(5,000

)

—

(5,000

)

Proceeds from maturities of marketable securities

6,305

49,450

33,163

71,447

Proceeds from the sale of a business, net of cash and cash equivalents sold

3,176

—

90,348

—

Proceeds from sales of marketable securities

2,311

1,386

23,600

36,963

Proceeds from life insurance

—

873

460

Net cash used for investing activities

(49,796

)

(27,536

)

(554,883

)

(149,222

)

Cash flows from financing activities:

Repurchase of common stock

(24,747

)

(118,647

)

(55,053

)

(346,492

)

Dividend payments

(19,566

)

(16,897

)

(56,936

)

(51,081

)

Payments related to net settlement of employee stock compensation awards

(399

)

(278

)

(13,833

)

(20,586

)

Payments of borrowings on revolving credit facility

—

(185,000

)

—

Payments of convertible debt principal

—

(9,277

)

—

(26,735

)

Proceeds from borrowings on revolving credit facility

—

185,000

—

Issuance of common stock under stock purchase and stock option plans

15,429

17,485

37,265

34,084

Net cash used for financing activities

(29,283

)

(127,614

)

(88,557

)

(410,810

)

Effects of exchange rate changes on cash and cash equivalents

940

4,556

6,286

5,769

Increase (decrease) in cash and cash equivalents

88,132

23,753

(247,535

)

(217,812

)

Cash and cash equivalents at beginning of period

421,904

613,208

757,571

854,773

Cash and cash equivalents at end of period

510,036

636,961

510,036

636,961

GAAP to Non-GAAP Earnings Reconciliation

(In millions, except per share amounts)

Quarter Ended

September 29, 2024

% of Net Revenues

June 30, 2024

% of Net Revenues

October 1, 2023

% of Net Revenues

Net revenues

737.3

729.9

703.7

Gross profit - GAAP

436.5

59.2

425.8

58.3

398.3

56.6

Legal settlement (1)

3.6

0.5

—

Gross profit - non-GAAP

440.1

59.7

425.8

58.3

398.3

56.6

Income from operations - GAAP

152.1

20.6

210.4

28.8

144.0

20.5

Acquired intangible assets amortization

4.7

0.6

4.7

0.6

4.7

0.7

Restructuring and other (2)

4.6

0.6

2.0

0.3

6.9

1.0

Legal settlement (1)

3.6

0.5

—

Gain on sale of business (3)

—

(57.5

)

-7.9

—

Income from operations - non-GAAP

165.0

22.4

159.6

21.9

155.6

22.1

Net Income per Common Share

September 29, 2024

% of Net Revenues

Basic

Diluted

June 30, 2024

% of Net Revenues

Basic

Diluted

October 1, 2023

% of Net Revenues

Basic

Diluted

Net income - GAAP

145.6

19.7

0.89

186.3

25.5

1.18

1.14

128.1

18.2

0.83

0.78

Acquired intangible assets amortization

4.7

0.6

0.03

4.7

0.6

0.03

4.7

0.7

0.03

Restructuring and other (2)

4.6

0.6

0.03

2.0

0.3

0.01

6.9

1.0

0.04

Legal settlement (1)

3.6

0.5

0.02

—

Amortization of equity method investment

2.4

0.3

0.01

—

Loss (gain) on foreign exchange option

—

(4.2

)

-0.6

(0.03

)

(0.03

)

—

Gain on sale of business (3)

—

(57.5

)

-7.9

(0.36

)

(0.35

)

—

Pension mark-to-market adjustment (4)

(2.3

)

-0.3

(0.01

)

(0.01

)

(0.3

)

0.0

(0.00

)

(0.00

)

0.1

0.0

0.00

Exclude discrete tax adjustments

(8.9

)

-1.2

(0.05

)

(0.05

)

10.5

1.4

0.07

0.06

(4.8

)

-0.7

(0.03

)

(0.03

)

Non-GAAP tax adjustments

(2.1

)

-0.3

(0.01

)

(0.01

)

(1.5

)

-0.2

(0.01

)

(0.01

)

(3.5

)

-0.5

(0.02

)

(0.02

)

Net income - non-GAAP

147.6

20.0

0.91

0.90

140.0

19.2

0.89

0.86

131.5

18.7

0.86

0.80

GAAP and non-GAAP weighted average common shares - basic

163.0

157.8

153.8

GAAP weighted average common shares - diluted (6)

164.3

163.5

164.1

Exclude dilutive shares related to convertible note transaction

—

(0.6

)

Non-GAAP weighted average common shares - diluted

164.3

163.5

163.4

(1)

For the three months ended September 29, 2024, legal settlement includes charges for a settlement following a judgment against the Company for infringement of expired patents.

(2)

Restructuring and other consists of:

Quarter Ended

September 29, 2024

June 30, 2024

October 1, 2023

Employee severance

1.3

2.0

4.7

Contract termination

—

1.5

Other

3.3

—

0.6

4.6

2.0

6.9

(3)

On May 27, 2024, Teradyne sold DIS, a component of the Semiconductor Test segment, to Technoprobe, for $85.0 million, net of cash and cash equivalents sold and a working capital adjustment.

(4)

For the quarters ended September 29, 2024, June 30, 2024 and October 1, 2023, adjustments to exclude actuarial gains and losses, respectively, recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting.

(5)

For the quarters ended September 29, 2024, June 30, 2024, and October 1, 2023, non-GAAP weighted average diluted common shares included 0.5 million, 4.9 million and 9.2 million shares, respectively, from the convertible note hedge transaction.

Nine Months Ended

September 29, 2024

% of Net Revenues

October 1, 2023

% of Net Revenues

Net Revenues

2,067.0

2,005.7

Gross profit - GAAP

1,201.6

58.1

1,157.2

57.7

Legal settlement (1)

3.6

0.2

—

Gross profit - non-GAAP

1,205.2

58.3

1,157.2

57.7

Income from operations - GAAP

440.2

21.3

376.7

18.8

Acquired intangible assets amortization

14.1

0.7

14.3

0.7

Restructuring and other (2)

11.0

0.5

15.3

0.8

Legal settlement (1)

3.6

0.2

—

Equity modification charge (3)

1.7

0.1

5.9

0.3

Loss (gain) on sale of business (4)

(57.5

)

-2.8

—

Income from operations - non-GAAP

413.1

20.0

412.2

20.6

Net Income per Common Share

September 29, 2024

% of Net Revenues

Basic

Diluted

October 1, 2023

% of Net Revenues

Basic

Diluted

Net income - GAAP

396.1

19.2

2.51

2.42

331.7

16.5

2.14

2.01

Acquired intangible assets amortization

14.1

0.7

0.09

14.3

0.7

0.09

Restructuring and other (2)

11.0

0.5

0.07

15.3

0.8

0.10

0.09

Loss (gain) on foreign exchange option

9.8

0.5

0.06

—

Legal settlement (1)

3.6

0.2

0.02

—

Amortization of equity method investment

2.4

0.1

0.02

0.01

—

Equity modification charge (3)

1.7

0.1

0.01

5.9

0.3

0.04

Pension mark-to-market adjustment (5)

(2.5

)

-0.1

(0.02

)

(0.02

)

0.1

0.0

0.00

Loss (gain) on sale of business (4)

(57.5

)

-2.8

(0.36

)

(0.35

)

—

Exclude discrete tax adjustments

(0.7

)

0.0

(0.00

)

(0.00

)

(6.7

)

-0.3

(0.04

)

(0.04

)

Non-GAAP tax adjustments

(7.9

)

-0.4

(0.05

)

(0.05

)

(8.8

)

-0.4

(0.06

)

(0.05

)

Convertible share adjustment (6)

—

0.01

Net income - non-GAAP

370.1

17.9

2.34

2.27

351.8

17.5

2.27

2.14

GAAP and non-GAAP weighted average common shares - basic

158.0

154.8

GAAP weighted average common shares - diluted (6)

163.4

165.0

Exclude dilutive shares from convertible note

—

(0.8

)

Non-GAAP weighted average common shares - diluted

163.4

164.2

(1)

For the nine months ended September 29, 2024, a legal settlement includes charges for a settlement following a judgment against the Company for infringement of expired patents.

(2)

Restructuring and other consists of:

Nine Months Ended

September 29, 2024

October 1, 2023

Employee severance

5.3

11.8

Acquisition and divestiture related expenses

2.2

—

Contract termination

—

1.5

Other

3.5

1.9

11.0

15.3

(3)

For the nine months ended September 29, 2024, selling and administrative expenses included an equity charge of $1.7 million for the modification of Teradyne’s executives' retirement agreements. For the nine months ended October 1, 2023, selling and administrative expenses included an equity charge of $5.9 million for the modification of Teradyne’s retired CEO’s outstanding equity awards in connection with his February 1, 2023, retirement.

(4)

On May 27, 2024, Teradyne sold DIS, a component of the Semiconductor Test segment, to Technoprobe, for $85.0 million, net of cash and cash equivalents sold and a working capital adjustment.

(5)

For the nine months ended September 29, 2024, and October 1, 2023, adjustments to exclude actuarial gains and losses, respectively, recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting.

(6)

For the nine months ended September 29, 2024 and October 1, 2023, non-GAAP weighted average diluted common shares included 4.8 million and 9.0 million shares, respectively, from the convertible note hedge transaction.

GAAP to Non-GAAP Reconciliation of Fourth Quarter 2024 guidance:

GAAP and non-GAAP fourth quarter revenue guidance:

$710 million

$760 million

GAAP net income per diluted share

0.73

0.91

Exclude acquired intangible assets amortization

0.03